The supply of Ether (ETH) has stopped being deflationary after the implementation of Ethereum’s eagerly awaited Dencun upgrade, which went live two months ago.
According to data from CryptoQuant, the total supply of Ether increased from 120 million on March 12 to 120.1 million on May 7, following the rollout of the Dencun upgrade on the mainnet.
Although this increase is relatively small, it represents the first time that the supply of Ether has become inflationary since September 2022 when the Merge transitioned Ethereum to its current proof-of-stake consensus model.
The temporary loss of deflationary status for Ether is not a major concern for the Ethereum network, as its main advantages are more closely related to decentralized applications (DApps), according to Ki Young Ju, the founder and CEO of Cryptoquant. In a post on May 9, Ju stated that the benefits of Ethereum are not primarily tied to its deflationary nature.
Ether first became deflationary after the Merge on September 15, 2022, when a mechanism was introduced to permanently burn transaction fees on the network, resulting in a decrease in Ether supply. Over 419,713 Ether tokens have been burned or permanently removed from circulation since the Merge, as reported by ultrasound.money.
The Dencun upgrade has put an end to Ether’s inflationary trend by making median transaction fees up to four times cheaper than before, while maintaining the same level of network activity. While this is a significant development for the Ethereum network and its users, it could also mean the end of Ether’s status as ultra-sound money, according to a report by CryptoQuant on May 8.
Lower transaction fees have led to a decline in the amount of Ether being burned, reaching its lowest levels since the Merge, while supply growth has reached its highest level since the upgrade.
According to a report by CryptoQuant, a subsidiary of VanEck, the memecoin index has experienced a 137% increase year-to-date.